Did any of you come across the new PIMCO Long-Short fund? See
http://investments.pimco.com/Products/pages/629.aspx?ShareClassCode=INSTL Its institutional shares (PMHIX) are available at Fidelity for $100,000, see
http://fundresearch.fidelity.com/mutual-funds/summary/72201T540. One can buy for much less, but with load.
The fund was reorganized from a hedge fund with the same manager and the same strategy, so they can advertise its historic performance. This fund started its existence as a part of PIMCO only 2 months ago. It was 82% long, 3% short and 20% in cash, so it behaved almost as badly as the market, but its historic performance looks spectacular.
During its previous life as a hedge fund (2003-2012), it offered a very smooth ride, see the figure on the Fidelity website, and its annual total return was 13.67%, which is very impressive. But there is something else: According to its prospectus, if I understand it correctly, this fund offered 100% tax efficiency. It might happen that the after-tax data presented in the prospectus are misleading (usually hedge funds are tax-inefficient) but if this tax efficiency is a real deal, it is outstanding.
Of course it is quite possible that the fund will be much less impressive as a part of PIMCO. But at least on paper it looks most interesting. Or maybe I am missing something?
Comments
http://performance.morningstar.com/fund/performance-return.action?t=PMHIX®ion=USA&culture=en-US
http://www.investmentnews.com/article/20120614/FREE/120619944
An interesting tidbit:
"Pimco can also point to Mr. Johnson's ability to protect on the downside, which is a key focus for Pimco's equity funds. In 2008, his hedge fund only lost 5%, while the average long/short equity fund was down 15%. The S&P 500 fell 37%.
It wasn't the fund's ability to short that kept it largely out of trouble in 2008, Mr. Johnson said. "It was its ability to go to cash," he noted. The fund peaked at 95% cash as the markets were tumbling. “With cash, you know what your losses are going to be: zero,” he said. “With shorts, you don't know what your losses will be.”
Also:
"“We went through a lot of back and forth with the SEC to show that the hedge fund, by chance, already met all the requirements for a '40 Act fund,” said Neel Kashkari, head of global equities at Pimco. Specifically, the hedge fund wasn't using any leverage or strategies that are restricted in traditional mutual funds.
*************By converting the hedge fund into a mutual fund, rather than starting a new fund from scratch, Pimco is able to market the fund's past performance, which will give it an advantage with clients who are taking a wait-and-see approach when it comes to Pimco's equity capabilities."*************** (this is how they are getting away with being able to present the fund's prior record on M* and elsewhere)
I own the fund.
At that time, the total size of the fund was 16 M, which suggests that the original hedge fund was very small. This agrees with the information about this hedge fund which I found on the web. Meanwhile a month later the size of the fund was 212M, according to the PIMCO website. This suggests that in a year from now the fund may become huge. Thus I wonder whether such a fund can be as efficient as a tiny hedge fund with only 16 M. Maybe yes, if it is mostly in large cap long positions...
Thank you for your efforts. Kinda strange that the prospectus wording appears to be in opposition to the answer from humans. Hope they called the attorneys for a rewrite.
Take care,
Catch
David
Well, it was rather weird. They told me at first that they do not have any information about the previous tax efficiency of the fund. They took me seriously only after I pointed out the page in the prospectus which explicitly says that the fund had annual total return 13.67% since 2003, before and after taxes on distributions. Then someone called today and said that the hedge fund could be tax efficient, but the normal fund will not be tax efficient. It does not make much sense to me to hear that normal fund can be less tax efficient than the hedge fund, but maybe I do not understand something. It is a pity if people invest in this fund in the taxable account without verifying this information first. It took people at PIMCO so long to understand what I was talking about that I doubt that they are going to rewrite the prospectus. Of course, 13.67% per year is not bad even if taxes cut it in half...
"However, the privately offered fund was not registered as an investment company under the Investment Company Act of 1940 (the “1940 Act”), and the privately offered fund was not subject to certain investment limitations, diversification requirements, liquidity requirements, and other restrictions imposed by the 1940 Act and the Internal Revenue Code of 1986 which, if applicable,may have adversely affected its performance."
Despite the obvious relentless badgering by PIMCO, the publicly traded mutual fund (PMHIX) had an actual inception date of 4/20/2012, and not the 1/2/2003 listed by M* obtained from the SEC filing.
Even though the SEC caved to PIMCO, I was really hoping that M* would be objective and report the inception date and performance data only for the publicly traded mutual fund.
Once again, I was disappointed in M*.
Kevin